9 Costs That Lower Your California Workers’ Comp Settlement

California state law has some ways to make sure you don't end up owing more money than you should from your workers' comp settlement. But it can also get a little tricky when it comes to how workers' comp and other state insurance programs, such as disability and unemployment insurance, work together. You could end up with an unexpected bill in some scenarios.

To help you understand what costs might come out of your workers’ comp settlement — no matter which type of settlement you agree to — here are nine costs that you might need to pay after getting a workers’ comp settlement in California.

1. Lawyer fees

Hiring a workers’ comp lawyer in California shouldn’t cost you anything out of pocket. But you’ll owe that lawyer (also called an attorney) a fee when you settle your case.

Instead of requiring any fees upfront, workers’ comp lawyers in California agree to take a portion of any money they win for you. You won’t owe them anything until after your case is settled, and then you pay them a percentage from your final settlement.

These lawyer fees are called contingency fees because whether your attorney gets paid is dependent, or contingent, upon them winning money for you.

How much will you pay?

In California, attorney fees usually range from 9% to 15% of the total award you receive. But paying a slightly higher fee (like up to 18%) is possible in certain areas of Southern California where the cost of living is higher.

State law says that the contingency fee your lawyer gets has to be reasonable. To make sure it is, a state judge with the Workers’ Compensation Appeals Board (WCAB) has to approve it. To determine what’s reasonable, the judge takes into account:

• How much responsibility you gave the lawyer

• The level of service your lawyer provided

• The time your lawyer put into your case

• The results your lawyer achieved for you

While your lawyer is unlikely to get more than 15%, this approval system also incentivizes workers’ comp attorneys throughout the state to get the best possible results for their clients.

Learn more about average fees for California workers’ comp lawyers.

What happens if you have multiple lawyers?

If your lawyer is not delivering the level of work you expected, you can fire them and hire another lawyer. In situations where you have multiple attorneys, the final fee that you pay is still the same. That fee is then split between all of the lawyers who worked on your case. The Board decides on the exact split, and it’s paid automatically from your final settlement so you don’t need to figure it out yourself. The thing to note is that the split is generally based on how much time an attorney spends on your case and not on how much work they put in. That could make it hard to hire a second attorney since they won’t get the full fee and, depending on when you sign them, you could get a smaller portion of the ultimate fee.

2. Out-of-pocket costs lawyer expenses

In addition to their contingency fee, you might owe your lawyer a little extra from your settlement. If they advanced certain costs for you — like expert witness fees or interpreter fees — you generally need to reimburse them for those expenses.

If the lawyer’s out-of-pocket costs come from proving your injury or illness — like requesting medical records — the insurance company usually needs to cover those costs.

Again, these fees are usually paid directly from your settlement (before you get it) so you don’t have to pay anything out of pocket.

3. Medical liens

Medical billing for workers’ compensation is complicated. If the insurance company refuses to cover some of your medical treatment, the providers that give you care will sometimes use a medical treatment lien.

In technical terms, a lien gives one party the legal right to an asset to satisfy a debt. In the case of a workers’ comp settlement, it gives someone else (like a doctor or lawyer ) the right to claim money from your settlement to get paid what they’re owed.

When a medical provider puts a lien on your workers’ comp claim, they’re saying that when it gets settled, they have to get paid for services rendered and treatments performed. Medical treatment liens help doctors and hospitals ensure they get what they’re owed even if the workers’ comp insurance company denies coverage.

When you negotiate a workers’ comp settlement, always tell your attorney about denied medical coverage or potential liens so they negotiate a larger settlement or possibly a smaller bill from the medical provider.

What is a lien?

A lien gives a person, company, government, or other party the legal right to claim an asset — like money or property — to pay a debt that they’re owed.

4. Permanent disability benefit advances

Your settlement should cover the estimated value of future lost wages. Since that’s also what permanent workers’ comp benefits cover, if you already received permanent benefit checks, their value will come out of your settlement.

The amount that insurance has already paid you in permanent benefits is usually baked into settlement negotiations. That means you don’t need to pay anything back out of pocket because your final settlement amount was already decreased to cover the benefits you received.

In the situation that your permanent benefits weren’t part of the negotiation process, you will need to pay them back separately.

Refresher: how permanent workers’ comp benefits work

The initial workers’ comp payments you receive are legally called temporary disability benefits. If you recover as much as possible from your injury but still can’t return to your previous job (a point called maximum medical improvement) then your temporary benefits will end and you will receive permanent disability benefits instead.

California requires insurance to send your first permanent benefit check within 14 days of your temporary benefits ending. Even if you’re in the middle of negotiating a settlement, insurance has to keep up with those payments.

Learn more in our full guide to California workers’ compensation.

5. State disability insurance (SDI) repayment

You usually can’t receive workers’ compensation and California state disability insurance (SDI) at the same time. So if you received disability insurance payments and then you got workers’ comp payments for the same work-related injury, you’ll have to repay the value of the disability checks. The California Employment Development Department (EDD) can file a lien against your settlement to recover that money.

6. Medical insurance repayments

Workers’ comp pays medical expenses related to your work injury. If another health insurance company initially covers those costs instead, you’ll have to repay that company. The good news is that your workers’ comp lawyer can help you negotiate this repayment into your settlement.

For example, both Medicare and Medicaid are what’s called secondary payers. That means they only step up if another insurance policy isn’t responsible for the medical expenses. So if Medicare covered some of your bills because your company’s workers’ comp insurer initially denied your claim, you’ll need to pay back Medicare.

Similarly, state law allows for other third parties, like a private health insurance provider, to place a lien on your claim for any reasonable expenses they paid to get you the medical care you needed for your work-related injury or illness.

A note for Medicare recipients

Medicare will not pay for any medical expenses related to your work injury until you’ve used all of your settlement money. But only a portion of that money is actually for medical care. The workaround is a Workers' Compensation Medicare Set-Aside Arrangement (WCMSA).

A WCMSA is a separate account you set up and fund from your settlement. By funding the account with only the settlement money that was negotiated for medical expenses, you can get Medicare to resume paying expenses after that account is empty instead of after your whole settlement is spent.

Medicare has to approve the amount you put into your WCMSA and fortunately, your lawyer can help you determine the appropriate amount and work with Medicare to get it approved.

7. Unemployment insurance repayments

If you receive unemployment benefits and workers’ comp benefits for the same period while you aren't working, you’ll need to repay the unemployment checks. The state can place a lien on your claim so that repayment comes out of your settlement.

8. Child and spousal support

Workers’ compensation benefits can’t be garnished in most cases, though child and spousal support is an exception if the state finds that someone “has deserted or is neglecting his or her family.”

This situation won’t affect most people but if it does, your spouse, your child’s guardian, or another responsible party can file for a lien on your settlement to cover reasonable living expenses for your spouse or minor children. The state workers’ comp board decides how much support needs to come from your settlement (if any) after the other party files for the lien.

9. Other liens

Under California state law, other parties can file liens against your settlement if they paid for expenses that should have been paid by the workers’ comp insurance company.

Some possible workers’ comp liens include:

• Attorney fees you haven’t paid

• Burial expenses

• Compensation granted by the California Victims of Crime Program

• Your living expenses

Here’s the good news: Just because a lien is filed doesn’t mean you need to hand over the money. In California, you only have to pay a lien if the Workers’ Compensation Appeals Board approves it. You can wait to see what the Board decides about any lien filed against your settlement. If you think a lien is incorrect, talk to your attorney about how to remove it or change its value.

How to pay workers’ comp liens

If you do end up having to pay any California workers’ comp liens, you can do so through the state’s Electronic Adjudication Management System (EAMS).

How to maximize your workers’ comp settlement

A good lawyer will give you a good sense of what needs to come out of your workers’ comp settlement and negotiate a settlement that covers all necessary costs.

The average settlement with an Atticus workers’ comp lawyer is double the average national settlement for claims without a lawyer. That means even after you factor in the lawyer’s fee, you still make money, on average, by having a lawyer handle settlement negotiations.

To learn more, start by taking our quick workers’ comp quiz. We’ll call you to learn more about your situation, answer your questions, and connect you with an experienced lawyer. This call is free (so is your first call with the lawyer) and there are no upfront costs if you decide to work with Atticus.